Transfer of assets between Qualified and NQ Plans

[Guest SamFischer]

Is anyone aware of authority (IRS, etc.) that permits the transferring of assets between an employer's qualified and nonqualified plans based upon the results of the qualified plan's discrimination testing? Thanks, SF

[TCWalker]

Aware? Perhaps in the context of NQDCP plan to 401(k) under the paired plan PLR submissions in the early '90s. As I recall, there was a suggested way to structure these, where the NQ plan would "pour in" NQ deferrals at the PYE of coincident deferral periods to top-out the HCE's 401(k) deferral to the nonD percentage limit. Pretty messy idea.

[R. Butler]

I'm no expert, actually I'm just trying to learn as much as I can about NQ plans. I learn by reading & then by coming here to answer as many questions as I can.

I actually did find information about "wrap" plans. Prior to the beginning of the year participant will elect to defer into the NQ plan. That election will also specify whether the "allowable amount" will be transferred into the 401(k) plan. The "allowable amount" is would be the maximum deferral taking into consideration 402(g), 415 limits & the ADP test. If the participant elects to transfer, the allowable amount is transferred 2 1/2 months after the close of the plan year. If the participant does not elect to make the transfer it is distributed to the employee within 2 1/2 months after the close of the plan year.

You can find alot of information on the internet. Several PLRs were cited including 200116046, 200012083, 199924067 & 9807027.

[TCWalker]

A little off subject, but from a practical viewpoint I've always been concerned these arrangements are just too problemactic for most employers & TPAs. Senior execs have difficultly understanding how the initial election and pour-in feature works, make errors in their initial elections or ask HR to do it for them or ask HR to "FIX IT" later/ the 401(k) - NQ TPA, (maybe the same firm - maybe not), has difficulties performing the allowable amount transfer correctly & timely / data driven corrections to 415 limitations and nonD test results after 2-1/2 months just seem to happen. Anyway, not for the timid.

If anyone has experience with a tandem arrangement that followed the PLRs and was managed & communicated flawlessly by the service provider(s) I enjoy a post identifying the firm. Thanks.